Case - Restatement 2d § 25 & 87 an option contract
|Under Restatement 2d § 25 an option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.
§87. OPTION CONTRACT
(1) An offer is binding as an option contract if it
(a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
(b) is made irrevocable by statute.
(2) An offer which the offeror should reasonably expect to induce action or forbearance of
a substantial character on the part of the offeree before acceptance and which does induce such
action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
e. Reliance. Subsection (2) states the application of §90 to reliance on an unaccepted offer, with qualifications which would not be appropriate in some other types of cases covered by §90. It is important chiefly in cases of reliance that is not part performance. If the beginning of performance is a reasonable mode of acceptance, it makes the offer fully enforceable under §45 or §62; if not, the
offeror commonly has no reason to expect part performance before acceptance. But circumstances may be such that the offeree must undergo substantial expense, or undertake substantial commitments, or forego alternatives, in order to put himself in a position to accept by either promise or performance.... But the reliance must be substantial as well as foreseeable. Full-scale enforcement of the offered contract is not necessarily appropriate in such cases. Restitution of benefits conferred may be enough, or partial or full reimbursement of losses may be proper. Various factors may influence the remedy: the formality of the offer, its commercial or social context, the extent to which the offeree's reliance was understood to be at his own risk, the relative
competence and the bargaining position of the parties, the degree of fault on the part of the offeror,the ease and certainty of proof of particular items of damage and the likelihood that unprovable damages have been suffered.